WEBVTT - Regulation Authorities Delay Bayer-Monsanto Deal (Audio)

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<v Speaker 1>Virus plans sixty six billion dollar takeover it's American rival,

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<v Speaker 1>seeds giant Monsanto, is likely to be delayed until early

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<v Speaker 1>eighteen as talks with regulators intensified. The merger would create

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<v Speaker 1>the world's largest integrated pesticides and seeds company. European antitrust

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<v Speaker 1>regulators opened a comprehensive investigation into the deal in late August.

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<v Speaker 1>Liam Condon, chief of Buyer Crop Science, says he's very

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<v Speaker 1>confident the deal will ultimately go through based on the

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<v Speaker 1>tenor of negotiations so far. Joining us as Jennifer Ree,

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<v Speaker 1>senior litigation analyst for Bloomberg Intelligence, jen what are the

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<v Speaker 1>concerns were the merger like this in the midst of

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<v Speaker 1>an unprecedented wave of consolidation in the agro chemicals industry. Well,

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<v Speaker 1>I mean you just said it. That's the first thing.

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<v Speaker 1>You have a lot of consolidation in the industry, and

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<v Speaker 1>of course this is more and both in the US

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<v Speaker 1>and and the U, there are concerns about farmers, which

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<v Speaker 1>are the primary customers of all of these companies down

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<v Speaker 1>DuPont that just merged now Buyer Monsanto, as well as KEM,

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<v Speaker 1>China and Cygenda. So you know, what the EU is

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<v Speaker 1>concerned about are some overlaps between these two companies, Buyer

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<v Speaker 1>and Montanto in a couple different kinds of pesticides UM

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<v Speaker 1>as well as in some seats UM, as well as

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<v Speaker 1>the possibility that this combined company could bundle these products,

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<v Speaker 1>both of which are sold to farmers, and there could

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<v Speaker 1>be some harm that could come out of that ability.

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<v Speaker 1>So Jen, what is Buyer going to do with this

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<v Speaker 1>extra time, as it were, this delay in the takeover?

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<v Speaker 1>You know, I suspect and this is obviously just speculation

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<v Speaker 1>that what is happening is that they are working now

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<v Speaker 1>on negotiating remedies that they will have to agree to

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<v Speaker 1>with the EU in order to be able to close

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<v Speaker 1>their deal, and that they are they've decided that it's

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<v Speaker 1>worth it to them to have a little extra time

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<v Speaker 1>to try to make some arguments to limit what the

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<v Speaker 1>European regulators require them to sell off. And it's clear

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<v Speaker 1>they're going to have to sell assets, and they may

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<v Speaker 1>be simply trying to limit what it is they have

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<v Speaker 1>to sell there. And while they're discussing remedies with the regulators,

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<v Speaker 1>they're also holding talks with potential acquirers about some assets

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<v Speaker 1>that they may need to divest. It doesn't seem pretty

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<v Speaker 1>certain that the EU is going to require some substantial divestments. Oh,

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<v Speaker 1>I think so absolutely. You know, when they go into

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<v Speaker 1>a phase two, and then in particular, we know that

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<v Speaker 1>some assets were offered up early on during the Phase

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<v Speaker 1>one by Buyer in in the European Commission rejected that package.

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<v Speaker 1>So we do know that they expect investitures, and I

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<v Speaker 1>think it will be extensive. They did require down and

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<v Speaker 1>do Pont to divest assets um not seeds, but several

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<v Speaker 1>assets in the pesticide area, as well as Keim China

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<v Speaker 1>and Cententa to divest some chemicals in order to close

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<v Speaker 1>and I think we should expect that plus seeds and

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<v Speaker 1>maybe more. Here jen Uh Buyer is, you know, seeking

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<v Speaker 1>clearance from a lot of authorities around the globe who

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<v Speaker 1>have oversight of this kind of deal and various different

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<v Speaker 1>countries all over the world. If they get the EU

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<v Speaker 1>on board with whatever divestment they have to make, will

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<v Speaker 1>everything else fall into place or are they going to

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<v Speaker 1>have to deal similarly with other authorities? You know, it's

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<v Speaker 1>a good question. That is what usually happens, and that's

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<v Speaker 1>generally what happened in the Dow DuPont deal because in

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<v Speaker 1>that case, the European regulators required global divestitures by the company,

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<v Speaker 1>not not just divestitures that would have sold assets sold

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<v Speaker 1>within the European Union. So depending on what the EU

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<v Speaker 1>asks for here, if it's again this global remedy so

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<v Speaker 1>that it will cure concerns of other regulators, things might

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<v Speaker 1>just fall into place without any other regulators asking for

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<v Speaker 1>much more. But if not, other regulators could you know,

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<v Speaker 1>ask for certain smaller divestitures that might particularly affect the

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<v Speaker 1>cut consumers in their region. Buyer has sought clearance from

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<v Speaker 1>almost all of the roughly thirty authorities who have oversight

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<v Speaker 1>of the deal, and has received approvals from more than

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<v Speaker 1>one third of them. Does that seem low to you

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<v Speaker 1>when Buyer had previously said it expected to get approvals

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<v Speaker 1>to complete the transaction by the end of the year,

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<v Speaker 1>You know, it does actually seem a little bit low.

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<v Speaker 1>But sometimes what happens is some of the jurisdictions will

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<v Speaker 1>hang back and wait for sort of the the bigger jurisdictions,

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<v Speaker 1>the more key jurisdictions like the US, China, Europe, to

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<v Speaker 1>see what they're going to do in terms of the remedy.

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<v Speaker 1>They know there will be a remedy here, and they

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<v Speaker 1>want to hang back and see what that remedy is

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<v Speaker 1>going to be, um to understand whether or not they

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<v Speaker 1>might need something more to protect consumers in their regions.

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<v Speaker 1>So I think what's holding things up here is likely

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<v Speaker 1>the EU, which is really dragging here, as well as

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<v Speaker 1>the US. So jen assuming that uh, in fact, buyer

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<v Speaker 1>does have to divest a number of different things, and

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<v Speaker 1>they are in fact already talking, it sounds like to

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<v Speaker 1>some of the some of the potential acquirers, what can

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<v Speaker 1>we expect them to be vesting? What you know? Generally speaking, Well,

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<v Speaker 1>we do know from a press release that was issued

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<v Speaker 1>by the European Commission that there is a problem with

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<v Speaker 1>herbicides or beside is one kind of pesticide. The herbicides

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<v Speaker 1>essentially kill weeds, and in this case, mont Santo has

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<v Speaker 1>a product called Roundup and that overlaps with a product

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<v Speaker 1>that's sold by buyer, So it's very likely in that

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<v Speaker 1>area they're going to have divestitures. They also noted that

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<v Speaker 1>is the European Commission noted that there were seed overlaps,

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<v Speaker 1>particularly in oil seed rape seeds. And we also know

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<v Speaker 1>there's probably a problem with cotton seeds in the US

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<v Speaker 1>because when mont Santo acquired a company called Delta and

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<v Speaker 1>pine Land several years ago, they had to sell off

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<v Speaker 1>Delta and pine Lands cotton assets and they sold it

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<v Speaker 1>to Buyer. So at this point, there's no way that

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<v Speaker 1>buyer is going to have to be able to, you know,

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<v Speaker 1>combine those seeds again, those cotton seeds, so they'll likely

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<v Speaker 1>have to sell cotton seeds as well. Jen why this

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<v Speaker 1>wave of consolidation in the agro chemical industry, Well, you know,

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<v Speaker 1>it's likely that that's also a good question, and an

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<v Speaker 1>industry analyst could probably tell you more. But one of

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<v Speaker 1>the things we're seeing is that there is a lot

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<v Speaker 1>of need for innovation and R and D to you know,

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<v Speaker 1>to to meet rising demand, to deal with climate change

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<v Speaker 1>things like that that affect crops and affect the growth

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<v Speaker 1>of crops and our food supply. And it takes a

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<v Speaker 1>lot of money, a lot of capital, and and a

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<v Speaker 1>lot of scale to conduct the kind of R and

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<v Speaker 1>D that's needed. And that's exactly what Buyer and Monsanto

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<v Speaker 1>is arguing here that in order to conduct the kind

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<v Speaker 1>of innovation that they need to and R and d

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<v Speaker 1>going forward, they're going to be able to do that

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<v Speaker 1>much better off combined rather than individually. So can we

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<v Speaker 1>expect that this is gonna keep happening as throughout the

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<v Speaker 1>entire industry? Well, we may be. We may see it

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<v Speaker 1>continue to happen. I think one of the interesting things

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<v Speaker 1>that that could happen here though, because I was reading

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<v Speaker 1>an article today about B A. S F as one

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<v Speaker 1>of the possible buyers of the assets to be divested

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<v Speaker 1>by buyer in mont Santo, and the fact that the

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<v Speaker 1>company may be interested in both seeds and chemicals, and

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<v Speaker 1>B A. S F is a company that now has

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<v Speaker 1>chemicals and not seeds, So actually that sort of adds

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<v Speaker 1>to diversification here. It's sort of is a lessening of

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<v Speaker 1>consolidation if we add another combined seed chemical company into

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<v Speaker 1>the mix, because now you'll have four sort of big

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<v Speaker 1>combined seed chemical companies rather than three. We keep hearing

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<v Speaker 1>about the EU and the Commissioner, Margaret the Stayer, is

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<v Speaker 1>the EU seen as the toughest of the regulators? Well,

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<v Speaker 1>you know, I think right now, yes, and I think

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<v Speaker 1>that the US was considered pretty tough too. But now

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<v Speaker 1>we're in this transition stage and we still don't really

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<v Speaker 1>know what's going to happen going forward with the anti

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<v Speaker 1>trust agencies. Were still down three commissioners at the FTC.

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<v Speaker 1>We still don't have the head of the Antitrust Division

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<v Speaker 1>at the Department of Justice confirmed um appointed, but not confirmed,

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<v Speaker 1>And so we don't know what the trend is going

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<v Speaker 1>to be. But but most people think it's likely that

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<v Speaker 1>going forward in the next few years, the EU will

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<v Speaker 1>be the toughest on antitrust. Always great to have you on.

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<v Speaker 1>That's Jennifer Reaching, your litigation analyst for Bloomberg Intelligence. You

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<v Speaker 1>can read more of Jennifer's analysis by going to be

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<v Speaker 1>I go on the Bloomberg terminal